Mms Renta a Car

M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM scalawag 1 W2 occupation CASE W2. 1. 1 Part 1 The Intelligence Phase ONLINE charge up W2. 1 THE MMS RUNNING CASE MMS Rent-a-Car, ground in Atlanta, Georgia, has push by dint of apiece(prenominal)ows at study(ip) airports and cities move intoeout North America. Founded by CEO Elena Markum several years ago, it has seen luxuriant growth over the historic few years, mainly beca uptake it outfox throughers quality service, fast, at convenient locations. MMS is highly competitive, able-bodied to strikeer cars at lithe approximatelyly reject rates than its competitors because most of its airport facilities ar located near nevertheless no. at the airport.A keen user of information corpses, MMS tracks competitors grounds, sto exit in a large entropy w atomic number 18house, through its Web-based enterprise information system portal, CLAUDIA (Come hatfulvass About statUs for Deals and Information on Autos). CLAUDIA in any case tracks sales, wither status, other(a) internal status information, and external information slightly the economy and its pertinent comp angiotensin converting enzyments. CLAUDIA has been a great success in keeping MMS competitive. The First coming upon Elena c tout ensembles the coming to chooseher to order ELENA thank you all for coming on such short nonice. Im glad that we could schedule this stomaching through our new scheduling module of CLAUDIA.I endure you fix all take in my e-mail approximately our latest paradoxsales are off by 10 percentage. Basically, this exit put us in the red for the year if it continues for other 4 months. CLAUDIAs portent system that connect to our RMS (revenue management system) indicates that sales go forth continue to decrease for the succeeding(a) 4 months, even after we adjust prices. Folks, whats outlet on? I expect to know what has ca utilise this business, how we stinker fix it, and how we can prevent it f rom chance again. Aside from solving the problem, I motive to develop whatsoever(a) companionship close it and use it as an opportunity to improve our transmission wrinkle.MARLA Frankly, Elena, I arrogatet bring in it I detect a slight downslope in sales 2 months ago further was so meddling with our new fleet acquisitions that I planned to go back and opinion into what happened when I unblemished replacing the fleet later this hebdomad. I should declare passed word on to our analysts to pay a seek back then. Sorry. ELENA No problem, Marla. I should sire noticed it myself. Im glad you were at least aware and ready to move on it. So, we give up yard of a problem. What else do we have? S HARON My up-to-date reports from the travel assiduity indicate that over the past 6 months at that place has been a slight increase in businessProblems Elena has called a clashing of her vice presidents to discuss a problem that she noticed yesterday age tapping into CLAUDIA. Rentals are off about 10 percent bailiwickly from the MMS projections for last month. Further much, CLAUDIAs forecasts indicate that they will continue to decrease. Elena wants to know why. This morning, the following VPs are present Sharon Goldman, Marketing (CMO) Michael leeward, trading operations (COO) Marla Dana, Fleet Acquisitions (CFAO) Tonia van de Stam, Information Systems (CIO) Mark Lams, Knowledge Systems (CKO) Jelene Thompson, Accounting (CAO) rise Franklin, Finance (CFO) 2-1M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM varlet 2 2-2 Part II Computerized Decision nutriment overall. More great script are flying for business meetings, chemical formulas, trade shows, and pleasure. And the selfsame(prenominal) proportion of them is tear cars in North America. This is true for all of our primary markets major cities and airports scarcely not for our petty(a) markets in the smaller cities, where most rentings are for business. Overall, business should be up. Vaca tion business is up quite a number from the central Florida infrastructure set ad specials and major conventions. Both policy-making party conventions were held in major cities. selective information indicate that our rentals did not increase while the total market did. Our earlier forecasts indicated that business should have increased our rental rates reflect this, as does our increased fleet size, by 15 percent. The cars should be moving tho theyre not ELENA How about the advertizing impacts? ROSE Our financials indicate that we have been spending to a greater extent on advertisement in our primary markets. Yet those are where our sales are dropping fastest. JELENE I agree. Though our records were about 3 weeks behind, now they are up-to-date, and theyll hang on up-to-date, thanks to our upgrade to CLAUDIA.Im playing at the current entropy serious now on our secure wireless net engage, and were by all odds down. ELENA Okay. Our advertisement expenditures are up. Th ats because we made that deal with GMC (Gold Motors Corporation). We just finished replacing our entire fleet with GMC cars and vans, right, Marla? MARLA Absolutely The cars are much more reliable and cheaper to maintain than the ones that had the transmissions burning out every 45,000 miles (72,000 km). These cars and vans are the national best-sellers, have great reputations, and are of high quality. They have the highest safety records in most categories.All of the standard archetypes came in first sub covenants, compacts, mid-size, full-size, and minivans. About 6 weeks ago, we dismayed getting in the hot new GMC rover 1600 convertible. We have an exclusive deal on this hot little number. It looks standardised the sporty 1971 Fiat spider unless is construct to new quality standards. Its fun to engenderthey let me have one for a year before we got the fleet in They are expensive, and GMC owns the domestic market. We should be able to rent these out all the time. We have 5 at each agency across the country, and by years end we should have 10.SHARON We got an exclusive with them for the next 3 years. They only give the fleet discount to us, we feature their cars in our advertising, and they feature us in theirs. And the Spider came to us right off the new assembly line in Pittsburgh. ELENA I have one of the Spiders, too. So I suspect that theyre constantly rented out, arent they? MICHAEL Well, no. Only about half of them are rented. The rental rates were vatical to be band pretty high, hardly our RMS recommends setting it at the same price as a compact. We hedged a little and set the price to about 10 percent higher.Some local agency offices are overriding the system and setting the prices 15 percent less, and they slake cant move them. ELENA How about the other classes of cars? MICHAEL Rentals are down about 8 percent nationally on all the other ones. E LENA So sales are down 8 percent for everything hardly the Spider, and the Spider, which should be a hot seller, is off by 50 percent. I know from CLAUDIA that our inventory is okay. All the new cars came in on schedule, and we were able to sell the used cars through electronic auction sites and carmax. com. Folks, we definitely have a big problem.M ICHAEL As COO, I see that this is primarily my problem, though all of you here are traind. Weve never had this happen before, so I true(a)ly dont know how to classify the problem. But I approximate we can get at most of the information we require. This point is only a symptom of the problem. We pauperization to identify the cause so we can correct the problem. I want some time to get my analysts and Tonias moving on it. I will look at some major help from Sharons people, M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM page 3 Chapter 2 Decision Making, Systems, Modeling, and Support 2-3 and credibly a fight from everyone else.Sharon and I talked before the meeting. We both have a feeling that at that place is some thing wrong with how we are selling the new cars, simply we dont have enough information just even to identify it. I hope that once we solve this problem, well have a nice piece of strategic knowledge for Mark to put into the knowledge management system (KMS). Ill tentatively schedule a meeting through CLAUDIA next week, as close to this time as possible, depending on peoples previous commitments. Ill e-mail the major results as we go. Im sure well know something before the next meeting. ELENA Thanks, Michael.Okay, sept We know we have a serious problem. Weve seen its effects. Michael will assume willpower and move in front. I also want our IS analysts looking at entropy even before anyone requests them. That includes any weird economic trends or eventsand look at the underlying structure and parameters of our forecasting models, okay, Tonia? Sharon, you look into the advertising. See if there are any external events or trends or reports on the cars that could guess our rent als. The RMS has been accurate until now. Its been able to balance price, supply, and imply, but something happened.Thank you all and have a great day. masking CASE W2. 1. 2 Part 2 The Design Phase Later on the day of the first meeting, Michael Lee has his top analyst, Stephanie Elberson, look into what might have happened. Michael recognized that it was too advance(prenominal) to start looking into criteria, solutions, and more (he had studied decision making in a DSS course in his MBA program). He was still trying to understand the problem and separate the problem that could be conk outd from the symptoms. He cherished to make the connection between the two, but he felt that something was fundamentally wrong, and CLAUDIA could ot identify it. A good decision maker relies on apprehension and has a good feel for what makes sense and what does not. Michael is one of the best. Stephanie put together a team up up of analysts and started formulating areas to investigate. One mem ber of the team, Dot Frank, worked closely with Sharons analyst, Phil Abrams, to establish the accuracy of the forecasting model. Amy Lazbin, on Stephanies team, looked into entropybases of operational entropy available internally and economic data available through subscription services. The latter(prenominal) data focused on the auto rental, automobile, and general economic areas.The summary team initially set the data mine tools on self-winding to establish relationships in the data. For the most part, Amy was able to verify most of the relationships and assumptions that were already in the forecasting models and the RMS. Nothing new popped up from the artificial aflutter networks, clustering analysis algorithms, and statistical regression models. The pricing model and the forecasting models were all right, though there were some new fluctuations, and the errors were higher when the team looked into how well they had performed over the past 2 months as this new problem aros e.The team noticed that the queasy networks outperformed the regression-based systems a bit, so they set up an information system and trade group to look into how they could improve the regression-based models with neural networks. (This was a new opportunity, which led them to return to the newsworthiness phase with a new set of issues. ) Stephanie was puzzled. She met with Michael 2 days later to discuss what she was going to do next. She also invited the marketing team and the IS team to each forward soul to the meeting. Phil Abrams and Marina Laksey (from IS) joined the team at this point.The meeting was held in the electronic meeting center (EMC), where they would be able to analyze data and use the group support system (GSS). Heres how the meeting went STEPHANIE Thank you all for coming today. As you know, we are working hard on the problem or rather the symptomsto try to get to the heart of the problem. Data mining tools helped M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 23 8 PM Page 4 2-4 Part II Computerized Decision Support a bit, but there is something fundamentally wrong, and we have yet to find it. Any ideas?MARINA Stephanie, we used the data mining tools and looked at most, if not all, of the data we normally look at. And we unremarkably look at standard views through our spreadsheet-type interface. I know we have to look outside the box. First off, the 4 of us need to fire up our new, powerful OLAP (online analytical processing) computer software system, DOT (Data on Time). It taps into our data warehouse and other data, but it goes beyond data mining by allowing us to poke about in the data. We just got the software in 2 weeks ago, and I have already gone through the training course.It has legion(predicate) of the features that CLAUDIA has, but it allows us to look into multidimensional data from any of our data sources in any slice we assume. It also lets us link into other databases and data marts like the one that marketing has. let me start it up PHIL I agree. I learned how to use the OLAP software on my own, and Ive developed some interesting views of our marketing data that show relationships we did not believe possible. The graphics are almost automatic. permits try it The team saw the bumps in the data but had no idea what had caused them. At least they could see them.When they tapped into the advertising plans, they noticed a slight inverse relationship with sales and advertising. When they asked Phil about it, he said PHIL Sales dropped 2 weeks after our new roastmarketing campaign began. We severely advertised the new cars. Every national and local TV mercenary prominently displayed the Spider. We have data on that in our marketing databases. I know you dont normally look at that. Here, let me bring them up. Hmmm We show how much air time each commercial message played where, and what was in them. Let me do a little slice and aggregating here. Aha I see. We are mostly advertising the cars nationa lly.Sales are very listless in primary markets, but theyre also a bit weak in inessential markets. Ah Ah Ah One problem we have is distribution. We have over half the cars in the wrong places. We need to move all the Spiders from the secondary markets to the primary markets. But I hypothesize we have another problem The pricing, supply, and deal data that we are using to predict rentals dont make sense. The car officially has an insurance back seat, so it is a fourpassenger car. But youd be lucky to get a carryon suitcase back there. Since we didnt have data on it, someone in our group entered it as a four-seat compact with two doors.The system thinks it is a car ideal for a small family or a champion businessperson on a budget. These rent well in the Midwest in the secondary markets but badly in the convention areas, where there are men who are going through their midlife crises and single women who like to rent sporty cars. We have a dispense of analyses to do here on where we are advertising what. Im not sure who rents what where, but I suspect that we can target our ads fail once we come across our market clusterslike males in Nebraska, 45 years old, traveling to San Diego for trade conferences.We have the data we just need to establish them fail. MICHAEL Hold on. Before I start moving cars just about, we need to analyze this a bit more. Weve never had a car like the Spider, so we need to investigate its properties and which categories of customers would ideally want it. Part of the solution jumped at us. But what are we trying to do? If I remember correctly, a few years ago we ran a try before you demoralise promotion in conjunction with our previous car supplier. People could rent our excess stock on our off-days for half the rental rate for up to 3 days.If they bought the car from a dealer in the area, they got the rental price back. If not, they had fun with the car. It worked well. We noticed that people who liked the car they rented had a style to rent them again, especially in our primary markets. We have a lot to look into. I want to recap what we have. We know that our goal is to increase net profit. This is clearly our principle of choice. We need to come up with criteria that tie the impact of alternatives and determine how they affect our bottom line. Our RMS sets prices so that we can ideally do that.We have some errors in our marketing database we must second thought how we advertise and how we distribute our stock. Okay. Ill meet with the VP team in a yoke of days. Im going to e-mail them information about what weve uncovered and where to M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM Page 5 Chapter 2 Decision Making, Systems, Modeling, and Support 2-5 find the data. First Ill talk to Sharon so she can get busy with some ideas on marketing. At a Meeting 2 Days Later equal Place, Same People S TEPHANIE Good morning. Those of us in the trenches think weve got it Heres whats going on.We have several pro blems, each of which we have developed some alternatives for. Were going to discuss what we think are the best ones for each situation. Some we can implement right away others will take some time. Lets start with our objective to maximize profit. Our principle of choice is profit maximization. This part of the problem was easy. Our RMS recognizes this and adjusts prices automatically to maximize profit on an annual basis. There are some errors in the price elasticity curve for the Spider, but, in general, the legitimate question now is how to manage demand.Our advertising influences demand, as does our inventory. We need for the right product to appeal to the right customers. There are many criteria that we need to measure, from quality to color to size, and customer service, car availability, and so on, in terms of how they affect rentals. We are doing this, but need to do a better vocation of it in order to track our rentals. We have a team analyzing this right now. In a few wee ks, they will have some concrete recommendations for system upgrades to the RMS. Our symptoms indicate the following real problems and alternatives, among hich we can choose Data accuracy. We need to change the profile of the Spider from a compact to a sports car. We need to develop the RMS profile from what little data weve got. Fortunately, we can tap into market data that our faculty consultants at the University of Georgia (UGA) have gathered for us in their research. One of the faculty members drives a Spider as well. Inventory imbalance. We have done some analysis to determine what the real demand for the Spider is, how it affects the demand for other cars, and vice versa. We built an optimization model and solved it. Based on our urrent advertising, we have find that by moving about 15 percent of our fleet around (and not too far), we can take care of most of the demand imbalance. We recommend moving all the Spiders from secondary to primary markets right away. We also wan t to move some of our minivans and full-size cars around. Later, we can adjust advertising to push some secondary market demand. Advertising imbalance. We advertise where our customers are, but they rent elsewhere, and for different reasons. We need to do a better job of identifying customer homes to determine what to advertise where.Our analysis shows rentals are off partly because we indicate that we have the Spider. Young to middle-aged men and single women want to rent it, but we stock out where they are going. For example, we discover that middle-aged men and women from the Midwest rent compacts in the secondary Midwest markets, but those in the primary markets on the coasts want to rent the Spider. We are still analyzing effects like this and should be able to complete the work in about a week to determine how to realign our advertising efforts. cause before you buy. This actually is an opportunity, not a problem.When we saturate Spider demand in primary markets, we shou ld get some additional Spiders in the secondary markets and reestablish the try before you buy campaign. This car will be a real boon in this effort. Sharons group has already established a cooperative agreement with GMC. Theyre interested, and it should boost our profitableness on these cars by 18 percent. Discount substitutes. We discovered that many customers called or got on our Web site to rent the Spider. When they found out that we didnt have one for them, rather than rent a different car, many were so annoyed that they rented a car from one f our competitors, usually a Toyota MR-2. This happened in almost all of our primary markets. In our secondary markets, people really didnt want the Spider but preferably wanted full-size cars. Because our advertising features the Spider, they forgot that we rent other cars as well. Actually, we forgot to incite them. Our advertising is backfiring on us. We should immediately M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM Page 6 2-6 Part II Computerized Decision Support discount substitutes for the Spider until we get the Spiders in place next week. Florida estimation park demand.We have a unique opportunity here. Florida theme parks have been advertising heavily in Europe because the euro is strong telling to the dollar. We must increase advertising in Europe either with the theme parks or separately. Phil is confident that we can run a joint campaign. Marketing will look into this and how we might be able to get customers to pay in advance in euros. To do this, we may need to move minivans to Florida from as far away as Tennessee. What it boils down to is that we want to be more aggressive in balancing our stock to meet demand and tie this into the RMS and advertising.We also want to refine our advertising model to handle new types of cars, like sports cars, and update demand data more frequently. Michael, this is what we want to present to the VPs on Monday. Is that okay? MICHAEL Perfect We have set the real problems and have good alternatives. I really appreciate the effected staff work. If this all works out, the end-of-the-year bonuses for this team should be excellent. Lets go have lunch Im buying APPLICATION CASE W2. 1. 3 Part 3 The Choice Phase Mondays Meeting With All Vice Presidents, Stephanie, and Her Team ELENA Thank you again for coming.Stephanie, Michael tells me youre on to something. Lets hear what you have to say. STEPHANIE Well, we think weve discovered what to do. But first let me outline what the real problems are and some suggested solutions and why these are appropriate solutions. Next Stephanie essentially outlines the details from the meeting described in Part 2 of the Running Case. There is a little discussion to clarify a few points ELENA Amazing. Im glad Mark recommended acquiring DOT 3 months ago. Though expensive, its already paid off. Can you get me specifics on the bottom line for each alternative? STEPHANIE Not accurate ones for each just yet.Some w ill take up to a couple of weeks. We do have estimates on all of them. Here are the results in my PowerPoint presentation. ELENA Hmmm. Okay. I want those data on the Spider updated immediatelyand some of them moved to where theyll rent. MARLA Its already done. I took steps right away once Michael told me what happened. After all, its my responsibility. I already gave some updated data to IS. Theyve adjusted the RMS. Preliminary data indicate that they have improved our profitability already. In a couple of markets where it was relatively inexpensive, I have moved some cars around based on the DSS models recommendation.It worked I think we should make the major changes recommended by the solution to the model. My estimates, just from these few markets, are that it will work just as the model predicts. SHARON Were looking into how to modify our marketing and tie it into the RMS. Were also running models on how European marketing should work. Well know in a week what to do. ELENA Excel lent Heres where we stand. Were going to adjust the profile data of the Spider and all models frequently, move cars around, and discount substitutes until we can get the imbalance fixed.Well decide on what to do about the other issues after the rest of the analysis is completed. M02_TURB7293_09_SE_WC02. 1. QXD 12/22/09 238 PM Page 7 Chapter 2 Decision Making, Systems, Modeling, and Support 2-7 APPLICATION CASE W2. 1. 4 Part 4 The Implementation Phase The implementation of the first couple decisions was relatively easy. post vehicles were rented, and cars were moved. Discounts were easy to establish for substitute cars because this could be done as routinely as when there was a normal stockout.A customer would first be offered the opportunity to upgrade. If the customer turned it down, the upgrade would be offered free. This worked 95 percent of the time, even in the case of the Spider. Sales were up, and the company was projected to be profitable with these small changes. Elena go t the results of the additional analyses. They all made sense. She decided, with the advice of her VPs and the analysts, to go ahead with all the recommendations, but she held back on European marketing until a presence in Europe could be established in major markets.The try before you buy campaign would be started once there were 15 Spiders in each of most of the major markets and 3 in each secondary market. She also approved adding new data and features to CLAUDIA. When the advertising effort was refined and tied to the RMS, profits soared. Every member of Stephanies team and all the VPs involved got a generous end-of-year bonus, an extra weeks vacation, and a gift of a free GMC Spider. SUMMARY AND finding MMS ran into new problems when it changed its fleet.CLAUDIA was not equipped to handle new cars that were unlike others from past experience, and it did not track events as well as trends. Simons (1977) four phases of decision making, along with feedback, were followed, even th ough the problems were not really determine in the first phase. Successful problem solving was ultimately elegant using Web-based DSS. Case Questions 1. What is meant by a symptom versus a problem? Relate these ideas to the case. 2. wherefore is problem ownership so important? 3. flush though the problem was not identified at the end of the intelligence phase, what was? . How was the design phase performed in this case? 5. The choice phase seemed like a combination of design, choice, and implementation. Is this a problem? 6. The implementation phase seemed to involve elements of all the phases. Is this a problem? 7. How were new problems or opportunities handled as they arose? 8. Why do you suppose some alternatives were either modified or postponed? reference point This fictional decision-making case is loosely based on several real situations. Thanks to Professor Elena Karahanna at the University of Georgia for inspiring it.